Tread carefully on European Union tax deal negotiations, legislators warn

By Lillian Kiarie

Nairobi, Kenya: MPs have urged the Government not to sign the Economic Partnership Agreements (EPAs) until all contentious issues raised by East African states, particularly Kenya, are addressed.

Sotik MP Joyce Laboso tabled the Motion in Parliament Wednesday, asking the Government to take time to scrutinise the agreement and rectify some clauses before concluding trade negotiations with the European Union.

Though fully aware that failure to sign the deal could lead to the country losing its tax-free access to the European market, Laboso insisted that signing the agreement in its current state could harm for the country’s trade activities.

Some of the contentious clauses that have delayed the current negotiations for more comprehensive EPAs include the provisions under good governance and tax, environment and sustainable development, and obligations or consequences from Customs Union Agreements with the EU.

Other issues that had been raised by the Trade ministry in 2010 are economic development, export taxes and Most Favoured Nation Treatment (MFN) clauses. Economic development issues are relevant in addressing supply side constraints, while export taxes and MFN clauses limit policy space.

EPAs are trade deals being negotiated between the European Union’s 27 countries and 76 developing countries, mostly former British and French colonies in Africa, the Caribbean and Pacific.

Regional partners

This Motion comes shortly after Deputy President William Ruto directed Trade officials to complete pending clauses to ensure EPAs are signed before October 2014.

In October 2007, East African Community states, in a bid to preserve their customs union, agreed to negotiate with the EU as a bloc. However, among the five EAC countries — Kenya, Uganda, Tanzania, Burundi, Rwanda — Kenya is the only one not classified as a least developed country.

If the country does not meet the EPAs deadline, it will be relegated to an unfavourable trading regime by the EU.

The other four states have strongly resisted a mutual deal with EU, saying it could hurt domestic industrialisation. They are currently free to trade with the EU on tax-free basis without having to open up their economies as required under EPAs, unlike Kenya.

If the country independently signs the EPAs, it will contravene the statutes of the EAC Customs Union, and its regional partners could refuse to open their markets to Kenya to prevent EU goods from flooding their markets.

The EU accounts for 31 per cent of Kenya’s export market especially for tea, cut flowers and coffee.